Oil rose to a three-week high on Wednesday as OPEC+ agreed to its deepest production cuts since the Covid pandemic, in 2020, despite a tight market and opposition from the United States and other countries.
The market was also buoyed by US government data, which showed crude and fuel inventories falling last week.
Brent crude rose 1.7% to settle at a price of 93.37 dollars a barrel. The contract hit a session high of $93.96. The American West Texas Intermediate (WTI) gained 1.43%, to settle at 87.76 dollars a barrel. It reached $88.42 during the session. Both have risen strongly in the last two days and reached a maximum since September 14.
In Wednesday’s announcement of a 2 million barrel per day cut, OPEC could fuel a recovery in prices that have fallen to around $90 from $120 three months ago on fears of a global economic downturn. rising US interest rates and a stronger dollar.
Oil rose this week on anticipation of the cuts, said Fiona Cincotta, senior financial markets analyst at City Index. “The real impact of a big cut would be less as some of the members fail to meet their production quotas,” Cincotta added.
In August, OPEC fell short of its production target of 3.58 million barrels per day as several countries were pumping well below their existing quotas.
Meanwhile, Russian Deputy Prime Minister Alexander Novak said on Wednesday that Russia may cut oil production to offset the negative effects of Western-imposed price caps.
The United States was pressuring OPEC producers to avoid making deep cuts, a source familiar with the matter told Reuters, as President Joe Biden seeks to prevent a spike in US gasoline prices ahead of midterm elections. half term (November 8).
Last week, distillate stocks, which include diesel and heating oil, fell 3.4 million barrels on the week to 110.9 million barrels, versus forecasts for a 1.4 million-barrel drop, according to the data. of the EIA. Crude inventories posted a surprise drop of 1.4 million barrels to 429.2 million barrels.
“The production cut was driven by uncertainty surrounding the global oil market and economic outlook. OPEC+’s target is now 10.5 million barrels per day, which the Saudis say is a real cut of between 1 million and 1.1 million barrels. Oil should remain supported here following the OPEC+ decision and the EIA report, but the upside will be limited well before the $100/barrel level,” OANDA analysts said.
With information from Reuters